iRobot Corp (IRBT) 2015 Q1 法說會逐字稿

Good day, everyone, and welcome to the iRobot First-Quarter 2015 Financial Results conference call.

This call is being recorded.

As this time, for opening remarks and introductions, I would like to turn the call over to Elise Caffrey of iRobot Investor Relations.

Please go ahead.

Thank you, and good morning.

Before I introduce the iRobot management team, I would like to note that statements made on today's call that are not based on historical information are forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to risks and uncertainties, and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such statements.

Additional information on these risks and uncertainties can be found in our public filings with the Security and Exchange Commission.

iRobot undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information or circumstances.

During this conference call, we'll also disclose non-GAAP financial measures as defined by SEC Regulation G, including adjusted EBITDA, which we define as earnings before interest, taxes depreciation, amortization, merger and acquisition expenses, restructuring expenses, net intellectual property litigation expenses, and non cash stock composition expense.

A reconciliation of GAAP and non-GAAP metrics can be found in the financial tables at the end of the first-quarter 2015 earnings press release we issued last evening which is available on our website.

On today's call, iRobot Chairman and CEO, Colin Angle, will provide a review of the Company's operations and achievements for the first-quarter 2015, as well as our outlook on the business for 2015.

Alison Dean, Chief Financial Officer, will review our financial results for the first quarter 2015, and Collin and Alison will also provide our financial expectations for the second quarter ending June 27, 2015 and FY15.

Then we'll open the call for questions.

At this point, I'll turn the call over to Colin Angle.

Good morning, and thank you for joining us.

Our first quarter results exceeded our expectations.

Home Robot revenue was up slightly over last year, while D&S revenue grew 17%.

Earning-per-share were $0.16, adjusted EBITDA was $13 million or 11% of revenue.

Based on our Q1 results and our outlook for the rest of 2015, we continue to expect 2015 revenue of $625 million to $635 million, driven by home robot growth.

We are reducing the high end of our EPS and adjusted EBITDA ranges for 2015, and now expect EPS of between $1.25 and $1.35 and adjusted EBITDA of $85 million to $90 million or roughly 14% of revenue.

These expectations reflect our confidence that Home Robot revenue will grow 11% to 13% for the full year as we discussed in February, with US growth in the mid teens and overseas in single digits.

The market in China is very strong, while EMEA and Japanese markets continue to be negatively impacted by macros.

Also included in our revised expectations are incremental marketing investment.

It is important for us to continue to strengthen brand and awareness in the United States and China, growth regions not impacted by macros, as well as support our international Partners through difficult economic times.

We need to ensure traditional levels of demand generation spending continue, so that they're well positioned for growth when markets improve.

For 2015, that means a larger financial investment than we had contemplated in the expectations we provided in February.

Now I'll take you through some of the details for the first quarter, and our expectations for the rest of 2015.

In the first quarter, our Home Robot business was up 3% year-over-year as expected.

Our Defense & Security and Remote Presence businesses also delivered results consistent with our expectations.

International Home Robot revenues were up 5% year-over-year, driven by strong growth in EMEA and China from higher Roomba 800 sales.

Last year, we began shipping limited product to select international distributors late in Q1 compared with a full quarter of availability this year.

EMEA grew roughly 20%, while APAC was down approximately 10%.

Growth in China was strong, but not enough to offset the expected year-on-year decline in Japan.

While macros continued to negatively impact consumer spending as we expected, we do believe the worst is behind us.

Our Japanese distributor reported improvement in sell through at the end of Q1, but it will take a while for this trend to positively impact revenue.

In the United States, Q1 sell through at our top five US retailers increased roughly 20% over last year.

Strength in this market is masked by the 30% plus growth in Q1 in 2014 last year from the then new Roomba 800 distribution as we entered that product into retail channels.

As we've consistently discussed, year-over-year quarterly comparisons can be difficult due to the timing of new product introductions, and we're in the distribution cycle of those products.

While Roomba is driving overall revenue growth this year, we are seeing Braava doing well in China, where it's been sold for less than one year.

We continue to see the wet floor care market as a growth opportunity, as we improve its positioning and better articulate its value proposition.

In Q2, we expect US revenue to grow in the mid-teens, and total home revenue to be flat year-over-year.

International revenue is expected to decline when compared to the 20% growth in Q2 last year from the initial distribution of Roomba 800.

Turning now to our Defense & Security business, first-quarter results were in line with our overall expectations with more than 70% of that revenue from spares and support or product life cycle revenue.

We have good visibility through the second quarter, when D&S revenue is expected to be more than double Q2 of last year.

Delivery of robots and services under the Canadian contract we won last year will comprise most of Q2 revenue.

We have a solid pipeline of opportunities for both the DoD and the international customers, but the timing of orders and delivery is uncertain at this point and thus, we have less visibility in the second half of the year.

We remain optimistic about the long-term prospects for this business in both the DoD and international markets.

We have a number of viable international opportunities, but selling into that market is challenging given the longer sales cycle and the complexity of working with foreign governments.

We're continuing to sell spares, service, and support for the installed base of more than 5,000 iRobot unmanned ground vehicles.

And we have increased our use of distributors in North America to assist us in capturing new opportunities within the DoD, nuclear, and to help us access the fragmented first responder market.

Turning now to our Remote Presence business, we have had some exciting developments over the past couple months.

We've previously talked about the importance of developing a list of referenceable accounts that we can leverage to help accelerate sales of our mobile telepresence robot, the Ava 500.

And I'm pleased to report that we recently installed multiple Ava 500s at Fidelity Investments FCAT Center for various applications, including collaboration and tours for internal and external customers as well as their partners.

As we have said, our primary focus for Ava in 2015 will be scalability.

As we actively work with customers to shorten the sales cycle, and simplify the implementation process.

With marquee accounts like Fidelity, were are progressing towards those goals.

In summary, we are off to a good start in 2015.

In the first quarter, Home Robot revenue grew year-over-year despite the macro headwinds and is expected to grow in both domestic and oversea markets for the full year 2015.

We will continue to invest in marketing programs to drive growth opportunities in non foreign currency exchange impacted regions, while helping our internal Partners weather the weak economies in their markets, and we will continue to invest in key technologies that extend our market-leading position in practical robotics.

I will now turn the call over to Allison to review our first-quarter results in more detail.

Thank you, Colin.

We delivered first-quarter revenue, earnings-per-share, and adjusted EBITDA slightly ahead of expectations.

Revenue of $118 million increased 3% from Q1 last year, driven by growth in Home Robot, and D&S revenue.

EPS was $0.16 for the quarter, compared with $0.18 for the same period last year.

Q1 adjusted EBITDA was $13 million.

Domestic Home Robot revenue was flat year-over-year in Q1.

Keep in mind that in Q1 2014, domestic revenue was up 31% from sales of our new Roomba 880, as well as the introduction of Scooba 450.

International revenue grew by 5% in the quarter, driven by strong performance in EMEA.

The fully distributed Roomba 880 drove EMEA revenue up more than 20% year-over-year.

In APAC, China revenue doubled year-over-year, but that was not enough to offset the expected decline in Japan.

As a result, total APAC revenue was down roughly 10% in Q1 compared with last year.

We continue to expect growth in all three regions for the full year, with the US growing in the mid-teens and oversees growth in single digits.

Defense & Security revenue of $7 million in Q1 was up 17% year-over-year.

Roughly 70% of this quarterly revenue was from PLR, and the balance was from robot sales.

For the total Company, gross margin was 45.5% for the first quarter 2015, up slightly from the same quarter last year.

Q1 operating expenses were 39% of revenue, up from 38% in Q1 last year.

Primarily due to increased R&D spend.

In Q2, we expect OpEx in the low 40%s as a percent of revenue, reflecting our normal higher Q2 marketing spend and some of the additional investments Colin discussed.

For the full year, we now expect operating expenses could be as high as 37% of revenues, up from our original 2015 target of 35% to 36%.

We ended the quarter with $221 million in cash and DII of [$71 million].

DII was higher than normal this quarter, as we shipped additional product to the US to ensure that we had sufficient product to meet retailers' Q2 orders given the west coast longshoremen's slowdown.

We expect Q2 ending inventory to return to our normal level of roughly 60 days.

Last month, we announced a new $50 million stock repurchase program to replace the current program which ends on April 30, 2015.

We believe we can take opportunistic advantage of volatile market conditions to buy back our shares, while maintaining the flexibility to make strategic investments in our future.

Now I'd like to provide you with additional detail for our Q2 financial expectations.

The outlook for our Home Robot business continues to be negatively impacted by overseas macros and challenging comps regionally from Roomba 800 sell in last year.

Therefore, we expect Q2 year-over-year revenue to be flat.

We expect strong revenue growth in our D&S business, driven by delivery of robots and services under the Canadian contract.

We expect second-quarter revenue of $143 million to $146 million, an increase of roughly 4% over Q2 last year, EPS of $0.02 to $0.06, and adjusted EBITDA of between $8 million and $10 million.

Given this view, we now expect roughly 58% of revenue to be generated in the second half of 2015.

I'll now turn the call back to Colin.

Thank you.

We are off to a good in 2015, as we weather global macros and invest to drive Home Robot growth.

Our D&S business will have a strong first half, and we are closely monitoring opportunities in our pipeline for more visibility in the second half.

With that, we'll take your questions.

(Operator Instructions)

And our first question is from Jim Ricchiuti from Needham and Company.

Thank you, good morning.

Good morning.

Two questions, first on the Home Robot business.

As we look at 2014 and the way that year unfolded in terms of the 800 sell-in, and look at what you seem to be implying for the second half of this year, there's a pretty strong growth trajectory in the second half in the Home Robot business.

And it also sounds like you're implying you think there's going to be a turn in some of the weaker geographic regions.

So I wonder if you could just elaborate a little bit more on that, Colin, in terms of what gives you the confidence that you're going to see that kind of a pickup in the back half in that portion of the business?

I think that the -- one of the driving factors is the demand for robot vacuuming is showing very strong continued signs of growth.

So that we have an underlying improvement in demand for our products.

Robot vacuuming is becoming more and more mainstream.

The skepticism barriers to purchase continue to be reduced.

And I think that our marketing programs continue to improve.

And as we more efficiently learn how to speak to our customers.

In the FX and macro impacted regions, Europe and Japan, we've also put additional attention to ensure that the proper levels of demand-generation spending continue to occur which wasn't happening to the levels that we would have liked toward the end of last year.

So that has been corrected.

So we see opportunity.

We had successful programs last year that we're building upon, and so that we have a very strong growth plan in place on the back of the strength of the 800 series robot.

That's helpful.

If I could ask a question on the defense business, the D&S business.

Sure.

Clearly Q2, you see some pretty good business.

A good pipeline to ship against.

As we look out at the second half of the year and we think about your full-year revenue guidance.

If we assume the high end of the range that you're giving for Home Robot business, you're still really talking about some pretty good growth in the D&S business.

And I'm trying to reconcile your comments about not having the visibility beyond Q2, and still the suggestion that you're going to show pretty good growth in D&S based on your forecast.

I think that, again, you have to look at the pipeline, and it does some to a good number but it's also some of the timing is uncertain.

I think that we're trying to signal and explain that it is promising, but we are a little anxious about the exact timing of when orders are going to come in.

So it's one of these things where you have optimistic signs, but some uncertainty mixed in.

And so that we feel like the views that we gave at the beginning of the year continue to be the views that we maintain, nothing has happened that would cause us to change.

But it is a lumpy business.

It has always been a lumpy business.

And from a predictability perspective, it is 9%, 10% of our overall revenue.

And thus, we're somewhat shielded from some of the swings and impacts that have hit us in past years.

Because just of the size of the business relative to home.

Is this timing uncertainty more toward the international business in terms of the --?

It's both domestic and international.

International has always been a challenge.

And in recent years, the timing and predictability of domestic orders, especially with the DoD, have also been somewhat challenging.

So I think it's evenly spread.

Okay, thanks.

I'll jump back in the queue.

Thank you.

Our next question is from Josephine Millward from the Benchmark Company.

Good morning.

Good morning

Colin, can you help us understand why guidance is more backend loaded?

Is it continued softness in Japan and Europe, or are you starting to see a slowdown in the US?

It's backend loaded because some of the marketing programs that we did last year showed such significant effectiveness during the back half of the year we've heavied up our demand generation spend for the period of time when we know that they would be most effective.

And that's going to naturally shift some of the revenue into the back half, because of the seasonality of marketing spend efficacy.

So that's one of the main impacts.

We've also, in the first half, been working through inventory from the last year coming in, and that may have had a slight negative impact.

But again, I think it's more looking at the timing of our demand generation.

That's helpful.

Can you give us an update on Remote Presence?

I think your Q1 revenue from that market was about $350,000.

What's going on with healthcare?

And if you can give us an update on the trial with Fidelity, and the potential there?

Thanks.

First off, Fidelity isn't a trial.

So that is a referenceable sale.

And the way, at least in this early phase of Remote Presence business development [to set]expectations is that we will find a beachhead within a company that is excited about the use of Remote Presence.

And as the product is used within the organization, you could see additional sales as more people within a company become exposed to the power of these devices.

And so that there was a trial with Fidelity, it led to a sale.

Utilization and exposure based on that sale leads to broadening of opportunity within these organizations.

We're focused on companies that can scale and turn a beachhead into a major installation, and we think Fidelity is a great example.

So I think that we're proud of that, and we have others that we can't at this point talk about in the works.

In the healthcare application, those sales are always going to be lumpy.

Where toward the end of last year, we fulfilled a PO to our partner, and so that they had -- took a -- they built some inventory, and now they're working that inventory, and there will be another lump shipment of product to them later this year.

So that one is just by its structure going to be somewhat lumpy.

Thank you.

You bet.

Our next question is from Adam Fleck from Morningstar.

Thanks, good morning.

Good morning.

I had a question on the Home Robot business.

We saw average selling price there down year over year for the first time in what I think is a pretty long time.

Was there any product or geographic mix that you would call out there?

If you compare Q1 2015 to Q1 2014, Adam, Q1 2014, we had a fairly even split across 800, 700, and 600.

As you look into 2015 and as we signaled at the end of last year, we're seeing more of a mix towards 800 and 600 this year.

And we also have higher Braava sales, and again, that's a much lower ASP point in the Home Robot business than the Roombas.

So those things are contributing to that ASP.

Great, that's helpful.

Thank you.

And then you mentioned, obviously, that you want to maintain the marketing investments in the non currency affected regions.

I think good discussion around the efficacy of those programs.

I'm just curious in your discussions when you were talking about increasing the incremental marketing spends in the FX hit regions, was there ever any discussion of potentially pulling back US marketing spend to maintain the profitability targets.

Or was that completely off the table?

I think that we do have these discussions.

But to be clear, we believe we're at -- approaching an inflection point in demand.

So this is not a mature market, pulling back is definitely not our intention.

We see the opportunity for continued strong growth as we move forward.

We believe that we're approaching a mainstreaming of robot vacuuming.

Our household penetration is still quite low relative to where we believe -- very low relative to where we believe it will go.

So we are bullish on the potential of robot vacuuming.

And so that we need to continue to invest in the healthy markets to get us to the point where word of mouth, region by region, drives an even higher growth rate than we're enjoying now.

And then in the FX impacted regions, need to keep them healthy, need to make sure we continue to drive demand generation where our distributors are less financially able to do that.

Great.

Thank you.

You bet.

Our next question is from Alex Gauna from JMP Securities.

Hello, everyone.

Colin, you talked about some of these increased marketing activities for this quarter.

Are some of the rebates and discounts we see going on right now a part of that programming?

Is it consistent with the historic norms?

And is there any other color around what the marketing campaigns and programs are that have proved more effective in the past that you think will prove effective here in this current period?

Sure.

So you have to pay attention to find these discount programs, because we did experiment and we do experiment with different types of strategies in an increasingly -- as the robot vacuuming market grows in its competition.

We will see people that use different marketing strategies, and ones that we've traditionally done, so that we do investigate their efficacy from time to time.

The 800 has been in the market for long enough that even we allow ourselves some ability to do some experiments with pricing strategies.

So certainly what you're seeing is not a shift in our marketing programs, but you did notice a few trials.

We're constantly validating our strategy, and working to ensure that we're not missing out on opportunities.

So you did see some of that activity in the first half of this year, you might see it occasionally through the balance of the year.

It is not representative of a major shift in our premium strategy, however.

So we are always looking to improve.

Okay.

Thank you.

And then I'm wondering also with regard to some of the back half loadedness of this year, is there any reason that we might be able to expect new products, new product categories, or any color around contribution from new revenue streams that might be in there?

And within that question, also I'm curious.

There's an article going around about some frequency concerns that might be out there with your robotic mowing, and maybe if you could address that.

Sure.

Well, in the last call, I did promise a navigating product this year.

And so that you should expect at some point, though I had not given any detail in what that product is or timing, I did promise you a new product with some significantly new features.

So we're very excited about that.

But you're not going to get any more color on this particular call about what that is.

But certainly that is baked into our expectations for the year.

As far as the public disclosure of our interest in using wideband RF beacons for a lawn mowing related product, yes, that's going on.

No, that's not coming -- that's not an imminent product, but it is a normal part of a product development cycle.

As we develop the product, we need to ensure that our strategies for doing outdoor navigation are going to be FCC compliant.

So this particular strategy that we are evaluating required an FCC waiver.

And this is the normal process to get such a waiver.

The NRAO, which was the sole objection to our request for public comment, is something that we take seriously.

We do not believe that it is an issue, and that there is an infinitesimal likelihood that what we're doing could impact them.

But this is something that the FCC staff is highly competent to determine.

And so that process is working its way through the normal course of evaluation.

Okay, got it.

Thank you very much.

You bet.

Our next question is from Troy Jensen from Piper Jaffray.

Thanks for taking my question.

Maybe for Colin, you had an activist take a position, file a 13D and make some suggestions on how to more monetize the business here.

So I'd just be curious to get your thoughts -- how receptive would you be to those suggestions?

Well, I think that we certainly value the views of our shareholders.

After subsequent to this call, we'll be listening to them, meeting them like we do with many investors.

You don't have to file a 13D to make suggestions.

I think that they've put some energy and thought into how to improve stockholder value, and we're certainly very willing to listen.

So there's a lot to those suggestions, and I think that I look forward to a good dialogue with them as we dive into the meat and their underlying assumptions.

All right, great.

And then just a last question from me, just the duration of the Canadian contract; is that just Q2 and no visibility beyond that?

The majority of the deliveries happen in second quarter.

There is opportunity for follow-on extensions and so forth with that contract.

But it will largely be complete as it exists in the first half.

All right, well good luck.

Thank you.

Our next question is from Meghna Ladha from Susquehanna Financial.

Hello, thanks for taking my question.

Colin, for 2015, it is expected to be more back and loaded this year than the last few years that we've seen.

Do you believe you have appropriately derisked guidance given increased competition in the second half, as well as the macro weakness that you cited on the call?

Yes, absolutely.

The guidance we're giving today gives our best view as to how we believe the year is going to play out.

As I mentioned earlier, we have shifted and done some additional investments.

In the back half of the year, we think those investments can be most profitable and that had an impact.

But we're very comfortable with the view that we're articulating at this point.

Okay.

And also on the call, you talked about the Japanese distributor reported an improvement in sell through at the end of Q1.

When do you think we could see this positively impacting revenue?

It's going to -- we believe that we saw a shift.

The next hope is to see that shift sustained.

And then getting -- and then that could lead to getting back onto a positive trajectory in Japan.

As you may know, Japan has been very significantly impacted by a devaluation of their currency.

Which makes the traditional marketing spend and profitability of products in Japan quite different than it was even 12 months ago.

So we've been working aggressively with our excellent distributor in Japan to address those challenges, and make sure that we're doing the correct amount of demand generation to drive business growth there.

So it's going to be a process this year.

We wanted to highlight on this call that we think that we have seen a turnaround there, which is very encouraging.

And we hope in subsequent calls to be able to report on stabilization and then strengthening and growth.

Got it.

And the last question was on R&D, that came in higher than expected at 16% of revenue.

What's particularly driving that increase?

And do you see still R&D as a percent of revenue in the 12% to 13% range in the next couple of years?

Thank you.

Yes, we do expect, Meghna, on an annualized basis that we'll still be in that 12% plus or minus range for R&D investment.

As is typical with any of our quarters, looking at any one quarter comp just based on the activities going on, could cause that to look out of whack to that annual number.

So what drove our Q1, which was actually to our expectations, it was just the timing of various programs we're working on, but there was nothing unusual in how that played out for us in Q1.

Got it.

Thank you so much.

You're welcome.

Our next question is from Bobby Burleson from Canaccord.

Good morning.

Just a couple of quick ones.

Obviously, the back end loaded nature of the early guidance is a point of concern.

I'm wondering what you guys are doing internally to get a better view on this kind of inflection to mainstream demand for home robots.

Any type of analysis you guys are doing that you could share with us that's giving you this confidence and this insight into this inflection.

And then I'm wondering also whether or not there's any distribution behavior that's maybe pulling back a little bit here in Q2 ahead of new product introductions that are expected for the second half?

Thanks.

Sure.

I can try to give you some amount of color on that, although it will be a little limited.

Last year, we successfully executed a number of programs designed to answer the question around how could we ramp demand generation spending effectively at the Company.

Because we felt like the household penetration numbers were still quite low given the customer satisfaction and the clear direction that robot vacuuming has been taking globally.

So what could we do to improve?

That work gave strong evidence as to a strategy which we are executing this year in order to drive additional demand.

And so that these are very formal market evaluations with a tremendous amount of analysis, because these are large bets that we make.

And gives us confidence that we can improve our growth rate over time through additional demand generation activities.

So we're excited by those results.

And I think that iRobot's growth rates will certainly be impacted as we are able to scale these programs.

But we're very -- I think that the revenue guidance for this year well back half loaded, does represent a number that with confidence we believe we can achieve.

And sorry to interrupt.

There was some new personnel brought in to help with that process, correct?

Correct.

We have a new Head of Marketing in Home who came to us from Keurig where he executed a similar growth initiative that certainly has been wonderfully successful for that company.

And that experience, we believe, translates quite well.

And the second part of the question was just whether or not in Q2 you think there's a little bit of a cooling off of demand from distributors as they wait for some product refreshes and that's part of the reacceleration in the second half that you're expecting.

I don't think that that's the main driver of our Q2 performance.

The new product introduction I alluded to, again is -- I would not suggest that that is impacting Q2 performance.

Okay, thank you.

Okay.

Our next question is from Paul Coster from JP Morgan.

Yes, thanks for take the question.

A quick one on the Scooba.

I'm just wondering as you look at the growth prospects for the home floor cleaning robots this year, how does the Scooba stack up to the Roomba?

The Scooba is still a small percentage of revenue relative to Roomba.

We are very optimistic about wet floor care.

It's one of the things that we have talked about as a future growth driver.

In particular, wet floor care seems to be -- I'm slightly expanding my response, Paul, to wet floor care in general from Scooba.

Because the wet floor care category includes Scooba and Braava.

And I think they're both important as we think about what's next beyond Roomba.

And so in particular, the China market has shown a very significant interest in the wet floor care categories, because that type of cleaning aligns well with traditional methods of cleaning.

There's a lot more mopping and dusting in China.

We also have successfully executed some tests in Japan for a wet floor care category online, and that will be rolling out into expanded retail distribution in Japan.

And north America has steadily allowed that to grow, although it has not gained ground on Roomba despite its growth.

Because we believe that Roomba, again, is a very vibrant and accelerating business with a lot of head room to go.

Okay, thank you very much.

All right.

And our next question is from Jim Ricchiuti from Needham and Company.

Thanks.

Last year, in Q3, you had I guess some earlier replenishment from your domestic customers.

It's early yet, I know.

But do you have any sense as to how the pattern looks in terms of the seasonality of the domestic business in the second half?

So if you're asking about how does the Q3, Q4 traditional split look.

I think it is a little too early to tell.

Yes, as I mentioned in the call, the sell-through in North America has been very strong in Q1, and wanted to make sure that that was not lost.

So that, I think you can also look at the increased marketing spend, which will ask our retailers to be bringing product in sooner.

And then we'll have to see depending on the results of those programs, whether or not -- how many resupply cycles hit in Q4.

It could be that some of our investment in Q4 spills over into a nice head start on 2016.

But we'll have to continue to track just how we retail behavior is going to play out.

Some of it has to do with retailer optimism about macros in general, as to how heavily they load up in Q3 versus being a little more reactive.

Jim, we do expect in the US that the revenue will probably grow Q3 over Q2, and then more significantly in Q4 over Q3.

But as Colin said, as we get closer to that Q3, Q4 timing, that could change.

But our best view right now is that Q4 would be the highest quarter of US revenue.

Got it.

And Alison, just on terms of the marketing spend, is that marketing spend going to be significantly different Q3, Q4 in the U.S?

Yes, you have our typical pattern that'll happen, right?

Where we usually heavy up in Q2 and Q4, and then some of the incremental investment that Colin talked about will be layered onto Q4 as well.

So you'll see more of that in Q4 than you would in Q3.

Okay, thank you.

You're welcome.

Okay.

That concludes our first-quarter 2015 earnings call.

We appreciate your interest and look forward to talking with you again in July to discuss our Q2 results.

Thank you, ladies and gentlemen.

That concludes the call.

You may disconnect at this time.